Pirelli: Press

Pirelli invests further 200 million dollars in Brazil in the 2009-2011 period ...

Thu, 02 Jul 2009 15:48:00 +0200

Pirelli invests further 200 million dollars in Brazil in the 2009-2011 period and increases manufacturing capacity

TOTAL INVESTIMENTS OF 300 MILLION DOLLARS IN THE PERIOD
2008-2011

PIRELLI TYRE AIMS FOR 10% REVENUE GROWTH IN BRAZIL IN THE 2009-2011 PERIOD

PIRELLI ABSOLUTE LEADER IN SOUTH AMERICA
IN THE TYRE INDUSTRY

THE GROUP IS PRESENT IN BRAZIL WITH 5 FACTORIES AND A RESEARCH CENTER FOR DEVELOPMENT AND PRODUCTION OF TYRES FOR THE CARS, MOTORCYCLES, AND INDUSTRIAL AND AGRICULTURAL VEHICLES OF THE MAIN WORLDWIDE MANUFACTURERS

IN THE 2004-2007 PERIOD THE COMPANY INVESTED APPROXIMATELY 300 MILLION DOLLARS IN BRAZIL, WITH 25% GROWTH IN MANUFACTURING CAPACITY AND 21% GROWTH IN SALES REVENUE

THE PIRELLI GROUP EMPLOYS MORE THAN 9,600 PEOPLE IN BRAZIL AND IS INVOLVED IN NUMEROUS SOCIAL, CULTURAL AND SPORTS INITIATIVES

PIRELLI CELEBRATES 80 YEARS OF PRESENCE IN BRAZIL WITH AN EXHIBITION AND EVENT

The Pirelli Group strengthens its presence in South America and continues to invest in Brazil, where this year it celebrates 80 years of industrial and commercial presence. New development plans were illustrated during a press conference held at the manufacturing site of Santo André , in the State of Sao Paulo, and attended by the Brazilian Minister of Development, Industry and Foreign Trade, Miguel Jorge , representatives of local institutional authorities, the General Consul of Italy in Brazil, Marco Marsilli , the Director of Istituto nazionale per il Commercio Estero (Italian board of foreign trade) in Sao Paulo, Giovanni Sacchi , the Chairman of the Pirelli Group, Marco Tronchetti Provera , the CEO and Managing Director of Pirelli Tyre, Francesco Gori , and the CEO of Pirelli Pneus América Latina, Guillermo Kelly .

Investments and increase of manufacturing capacity

Coherently with the 2009-2011 industrial plan, in the three-year period the Group will invest 200 million dollars in Brazil on top of the 100 million dollars already invested last year. This strategy of strengthening in the area will consolidate the leadership of the Pirelli Group in South American markets.

The new investments will allow for a 20% increase in manufacturing of tyres for cars and motorcycles. The 300 million dollars of total investments in the 2008-2011 period will be targeted one third to research and development and the remainder to increasing manufacturing capacity .

In the 2004-2007 period, the Group already invested approximately 300 million dollars in Brazilian factories for technological innovation of the facilities, renewal of the product portfolio, as well as to increase manufacturing capacity, up in the period by more than 25% overall in all the main market segments: car, motorcycle, and industrial, agricultural and off road vehicles.

Between 2005 and 2008, sales of Pirelli in South America grew by a total of 21%, surpassing in 2008 for the first time the threshold of two billion dollars . Brazil 's contribution to this result amounted to more than 60% , with more than 1.2 billion dollars .

Pirelli Tyre's growth target in Brazil in the 2009-2011 three-year period is for a total increase in revenues of 10% compared with 2008, despite a 2009 which, as already announced, will be affected by the strong crisis in demand worldwide.

Pirelli in South America

Brazil, where Pirelli has been present since 1929, is one of the fundamental countries for the Group's growth strategy. This country represents the first automobile and industrial vehicle market in the South American continent, one of the largest markets in the world. Brazil hosts the major automakers, motorcycle manufacturers, and industrial vehicle producers of South America and many of the top manufacturers worldwide.

The strong presence in this market appears particularly strategic in the current phase of world economic crisis, both because the area, driven in particular by the emerging economy of Brazil, has been less affected by the fall in demand, and because it offers a more efficient cost structure and a competitive base for exports.

The industrial and technological heart of Pirelli in South America is the Santo André plant, which became part of the Group 80 years ago and which employs 2,200 people in production of tyres for cars, motorcycles and industrial vehicles. Over the course of time, the industrial and commercial presence and importance of the Group has grown consistently, to the point where today Pirelli is absolute leader in Brazil and in all of South America .

Thanks in part to the Research and Development Center of Santo André , Pirelli's factories in Brazil are a point of reference for the automobile, motorcycle, and industrial vehicle industries, both for South and for North America. At its Brazilian sites Pirelli in fact produces tyres destined for all manufacturers present in the area including Fiat, Chrysler, New Holland, Iveco, Volkswagen, Audi, General Motors, Ford, Peugeot, Daimler, Honda, Suzuki, Yamaha, Mitsubishi, Toyota, Mazda, Scania, and Volvo .

The technological and industrial hub of Santo André is one of the centers of excellence, at worldwide level not only of the Pirelli Group but of the entire tyre industry. In particular, the research center of Santo André works in a network with Pirelli's other centers operating in Italy, Germany, the UK, the US and China, utilizing the support of Pirelli Labs. The Proving Ground in Sumaré that extends over 200,000 square meters and has become the reference point for tyre tests and for tests of vehicles of all segments (automobile, motorcycle, agricultural and industrial, SUVs etc.) completes the Santo André hub of excellence.

In 2008 South America represented 33% of overall sales revenue of Pirelli Tyre, equal to more than 4.1 billion euros (more than 6 billion dollars). The position of absolute leadership in South America is expressed both in the original equipment channel, and in all the main replacement markets, in particular in Brazil, where Pirelli can count on a distribution network of more than 600 exclusive points of sale.

Approximately 90% of the South American production of Pirelli Tyre is concentrated in Brazil , of which more than 35% is destined for export, including towards NAFTA area markets (the United States, Canada, and Mexico) for products with high technological content.

Currently, out of the 23 factories overall in the Pirelli Tyre Group, 7 are in the South American continent and are destined for production of tyres for cars, industrial vehicles, motorcycles, agricultural equipment and earth-moving and construction equipment. Five factories are in Brazil (Feira de Santana in the North of the country, Santo André, Sumaré and Campinas in the state of Sao Paulo, Gravataì in the South), one in Venezuela, near Caracas, and one in Argentina, near Buenos Aires. The headquarters of Pirelli in South America is in the city of Sao Paulo.

Overall, employees of Pirelli Tyre in South America count about 11,400 of which more than 9,600 in Brazil .

Social, cultural and communications activities of Pirelli in Brazil

The eighty year anniversary of Pirelli in Brazil is being celebrated with an exhibition and event entitled " 80 years of history. A way to leadership " which reflects back on the history of the Group in Brazil in all areas Pirelli is involved in. Industry, first of all, but also sports, communications and social and cultural activities, which have left their mark on the collective memory of the nation and have often crossed over into other countries. Such is the case of the famed advertisement depicting Ronaldo on the Corcovado, and of the Calendar, often set in Brazil and which will again have Brazil as its backdrop in the forthcoming edition.
The photographs of ‘The Cal 2010', taken by American photographer Terry Richardson, were shot in May in Trancoso, in the state of Bahia .

Coherently with the philosophy of the Group, which operates everywhere in the world and interacts and integrates with local communities, in Brazil too Pirelli promotes numerous initiatives in support of culture, social work and healthcare, education, training, and sports.

In the area of social welfare , the initiatives sustained by Pirelli in collaboration with local and central governing authorities cover various areas. In particular, the Group supports many projects helping recuperate and reinsert into society hundreds of disadvantaged children and adolescents all over the country, as well as programs in education, professional training, and civic education. There are many projects in healthcare, such as vaccination campaigns against epidemics typical of the tropical area, and information and sensitivity campaigns.

In Brazil, Pirelli's research focuses on sustainable development, in line with the Green Performance targets announced in the 2009-2011 industrial plan. In particular, the Group has a commitment with local authorities to acquire all the natural rubber produced with eco-sustainable methods in the Xapuri region, thus contributing not only to preservation of the region's environment, but also to economic development of the native populations according to local traditional culture. Pirelli also supports the national Brazilian program for recycling used tyres.

In addition to sponsorship of motor sports, often as single supplier (in total, 17 championships, including the Brazilian Superbike, rally and Gt3), Pirelli has also sponsored the Palmeiras soccer team, one of the top soccer clubs in the country, 4 times champion in Brazil and once in South America. Until the ‘80s, Pirelli was active in sports with the Clube Atlético Pirelli which counted many successes both at home and internationally in volleyball, boxing, judo and cycling.

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Pirelli: Shareholders' meeting

Tue, 21 Apr 2009 13:45:00 +0200

Pirelli: Shareholders' meeting Shareholders' Meeting of Pirelli & C. Spa:

2008 Financial Statements Approved
New Board of Statutory Auditors Appointed

Milan, 21 April 2009 - The Shareholders' meeting of Pirelli & C. SpA met today in ordinary and extraordinary sessions.

In the ordinary session, the Shareholders' meeting approved the 2008 financial statements, which did not foresee distribution of dividends.

The Shareholders' meeting also appointed, through the list system, a new Board of Statutory Auditors for the Company for fiscal years 2009, 2010 and 2011, composed of: Enrico Laghi (whom the Shareholders' meeting also appointed Chairman), Paolo Domenico Sfameni and Paolo Gualtieri, standing statutory auditors, and Luigi Guerra and Franco Ghiringhelli, alternate statutory auditors. The components of the new Board of Statutory Auditors were selected from the only list presented, by participants of the Pirelli & C. SpA Shareholders' Pact. Their compensation was confirmed at 41,500 euros for standing statutory auditors and 62.000 euros for the Chairman of the Board of Statutory Auditors. CVs of the new statutory auditors are available on the Company's website ( www.pirelli.com ).

In the extraordinary session, the Shareholders' meeting resolved upon definitive reduction of revaluation reserves in the measure utilized to cover the 2008 fiscal year result.

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The board of directors approves financial statements as of 31 March 2009

Tue, 21 Apr 2009 11:03:00 +0200

The board of directors approves financial statements as of 31 March 2009 THE GROUP CLOSES THE FIRST QUARTER WITH OPERATING PERFORMANCE IN LINE WITH THE TARGETS OF THE 2009-2011 INDUSTRIAL PLAN AND NET INCOME SUBSTANTIALLY IN BREAKEVEN.
INDICATORS SIGNIFICANTLY IMPROVED OVER FOURTH QUARTER 2008

- REVENUES: 1,043.0 MILLION EUROS (1,197.9 MILLION EUROS AS OF 31 MARCH 2008)

- EBIT: 46.8 MILLION EUROS, EBIT MARGIN 4.5%, IN LINE WITH TARGETS OF THE INDUSTRIAL PLAN

- TOTAL CONSOLIDATED NET INCOME: 1.1 MILLION EUROS. ATTRIBUTABLE CONSOLIDATED NET INCOME: 9.5 MILLION EUROS

- NET FINANCIAL POSITION: NEGATIVE FOR 1,278.9 MILLION EUROS (1,027.7 MILLION EUROS AT END 2008): AFFECTED BY SEASONAL FACTORS AND CASH-OUT LINKED TO RESTRUCTURING

- PIRELLI TYRE: REVENUES 926.9 MILLION EUROS (1,076.9 MILLION EUROS AS OF 31 MARCH 2008); EBIT 57.5 MILLION EUROS, EBIT MARGIN 6.2%

- PIRELLI RE: FIRST QUARTER OPERATING RESULTS STILL NEGATIVE, BUT IMPROVED OVER THE LAST QUARTER OF 2008

- LAUNCH OF NEW INCENTIVES PLAN: NEW RULES WITH "PARTICIPATION IN RISK" ON BONUSES FOR SENIOR MANAGEMENT

Milan, 21 April 2009 - The Board of Directors of Pirelli & C. SpA, which met today, reviewed and approved the interim financial report as of 31 March 2009.

The restructuring measures launched last year have made it possible to limit the impact from the protracted crisis, and to close the first quarter of 2009 with results showing improvement over the fourth quarter of 2008, even if in decline compared with the corresponding period of last year , due to the economic slowdown in the automotive industry and in the real estate sector, where the Group operates. Overall, the Group closed the quarter with operating indicators in line with 2009-2011 industrial plan targets, as presented last 11 February, with revenues equal to 1,043.0 million euros and an EBIT margin of 4.5%. Net income, a positive figure of 1.1 million euros, was substantially at breakeven point.

In the tyre business, in the first quarter Pirelli Tyre finalized part of the restructuring actions already communicated, in order to face the difficult market context, in a process of improving its industrial footprint and adjusting the fixed cost structure to the changed scenario. The first three months of 2009 showed signs of improvement over the last quarter of 2008 , though the high level of raw materials costs continued into the period, with benefits from the decline in these costs to be produced starting in the second quarter of 2009 together with benefits linked to a decrease in warehouse stock, already significantly underway.

Thanks to actions aiming for greater penetration in the domestic and international markets, Pirelli Eco Technology , the Group company operating in the area of sustainable mobility, registered during the quarter growing sales volume of particulate filters with respect to the corresponding period of 2008, even if the result was still influenced by structural costs for expansion of the business.

In real estate, Pirelli RE continued with the reorganization begun last year in order to face a changed scenario. The Company closed the first quarter of 2009 with operating results that were still negative, but improved over the last quarter of 2008 , though the sector continues to be hit by the crisis that started last year. In support of the new business model, and in order to allow the Company to express in the period covered by the 2009-2011 industrial plan the real implicit value of its assets, last 17 April the extraordinary Shareholders' meeting approved a 400 million euro capital increase.

In the other businesses , the good performance of Pirelli Broadband Solutions was noteworthy, closing the period with a profit and with revenue growth of over 50%.

Coherently with what was announced at the time of presentation of the Group's 2009-2011 industrial plan, during the quarter the Group continued in the direction of focus on and strengthening of the core businesses, including through redefining its asset portfolio. This included the agreement reached with Alcatel-Lucent on 24 March 2009 for the sale to it of a stake held in Alcatel-Lucent Submarine Networks, a company operating in submarine systems for telecommunications, for a total value of 56 million euros.

Pirelli & C. SpA Group

At consolidated level, revenues amounted to 1,043.0 million euros as of 31 March 2009, down 12.9% compared with 1,197.9 million euros in the first quarter of 2008 ( the organic variation, net of exchange rate effects, was -10.5%).

EBIT , amounting to 46.8 million euros, compared to a result of 115.1 million euros in the first quarter of 2008, with EBIT margin 4.5%, in line with the target foreseen by the 2009-2011 Group industrial plan. Total consolidated net income stood at 1.1 million euros compared with 62.4 million euros in the first quarter of 2008, while consolidated net income attributable to Pirelli & C. SpA amounted to 9.5 million euros compared with 33.8 million euros in the corresponding period of 2008. The results were influenced, in particular, by a lesser contribution from the real estate business to the results from investments, in part counter-balanced by the capital gain of 11.2 million euros linked to the sale of the stake in Alcatel-Lucent Submarine Networks.

Consolidated net equity as of 31 March 2009 was 2,302.4 million euros, compared with 2,374.4 million euros at the end of 2008. Consolidated net equity attributable to Pirelli & C. SpA amounted to 2,129 million euros compared with 2,171.8 million at end 2008.

The net financial position of the Group as of 31 March 2009 was negative for 1,278.9 million euros, compared with a negative position of 851.1 million euros at the end of the first quarter of 2008 and a negative financial position of 1,027.7 million euros at the end of 2008. The difference compared with the latter figure was related to the normal seasonal effect of the change in working capital in the businesses and to the cash-out of 45.8 million euros for restructuring.

Employees of the Group counted 29,662 compared with 31,056 as of 31 December 2008.

It should be recalled that the photonics business and the Integrated Facility Management business of Pirelli RE, sold during the course of the year, are considered "discontinued operations" and thus contribute only to the net result. For homogeneous representation, the comparison with 2008 figures is based on a like-for-like perimeter.

Pirelli Tyre

Revenues of Pirelli Tyre as of 31 March 2009 amounted to 926.9 million euros, down 13.9% from 1,076.9 million euros in the corresponding period of 2008. Net of exchange rate effects, which were negative for 2.7%, the organic change was a decrease of 11.2%, with a negative variation in volumes of 18.1% and a positive price/mix variation of 6.9%.

EBIT before restructuring charges stood at 61.0 million euros (6.6% of revenues) compared with 102.8 million euros in the first quarter of 2008, with a 40.7% decline reflecting the still high level of manufacturing costs registered in the period and the impact on sales volumes due to the negative market scenario. EBIT after restructuring charges amounted to 57.5 million euros (6.2% of revenues) compared with 100.3 million euros in the first quarter of 2008.

Net income as of 31 March 2009 amounted to 14.6 million euros compared with 57.7 million euros in the first quarter of 2008.

The net financial position was negative for 1,521.8 million euros compared with negative positions of 1,266.8 million euros and 843.8 million euros, respectively, at end 2008 and at the end of the first quarter of 2008. The increase was mainly due to absorption of cash (227 million euros), particularly concentrated in the seasonal nature of working capital which, in any case, registered lower growth compared with the first quarter of 2008 both in terms of volumes of activity and, above all, in terms of an already significant reduction in levels of stock , which should improve rotation levels in the second quarter. The financial position was also affected by the cash-out (39 million euros) linked to restructuring actions already determined in 2008, as well as a positive balance of 11 million euros from the sale of the Central Tyre distribution business in the UK for 15 million euros, net of completion of the purchase of minority stakes in the Turkish subsidiaries, with a further payout of 4 million euros.

In the Consumer business (Car/Light Truck and Motorcycle tyres), revenues amounted to 670.5 million euros, a decline of 10.4% (-8.1% organic decline, net of exchange rate effects) compared with the first quarter of 2008 (748.3 million euros), while EBIT before restructuring charges was 41.9 million euros, with EBIT margin 6.2%, compared with 72.5 million euros in the corresponding period in 2008.
The original equipment channel, particularly in the first two months of the year, suffered from a contraction in demand in the automobile sector already registered starting in the second half of 2008 and exacerbated in the fourth quarter of 2008, also following a cutback in production decided on by auto manufacturers in order to reduce the levels of stock. In the month of March there were signs of recovery , with less negative rates in some countries and positive growth rates in others, in part thanks to the positive effect of government incentives for auto sales.
For the replacement channel, the market contraction was more limited.
During the quarter, the Company presented the Cinturato P7 , the first ecological high performance tyre for the top segment of the market. The P7 completes the family of Cinturato green products, launched last year with the models (P4 and P6) destined for mid range cars.

In the Industrial business (tyres for Industrial Vehicles and Steelcord) revenues amounted to a total of 256.4 million euros, down 22% compared with the corresponding period in 2008 (328.6 million euros), while EBIT stood at 19.1 million euros, with EBIT margin of 7.5%, compared with 30.2 million euros in the first quarter of 2008.
The Industrial segment, more cyclical since it is closely aligned with macroeconomic performance in general and certain specific industries such as public works and large construction projects, registered a slowdown in both sales channels. The strategic positioning of Pirelli Tyre, with 87% of total production in low cost areas and 75% of sales in emerging markets, allowed the Company to maintain in any case good levels of relative profitability, if in the presence of costs of manufacturing factors and an unfavorable sales volume trend, down 25.7% and counterbalanced in part by the positive price/mix variant (+7.2%) which, net of a negative exchange rate variation of 3.5%, brought about an organic decline in sales of 18.5%.

Pirelli Eco Technology

Pirelli Eco Technology closed the first quarter of 2009 with revenues of 14.3 million euros compared with 16.6 million euros in the corresponding period of 2008. EBIT was negative for 2.8 million euros, slightly worse than the negative figure of 2.1 million euros in the first quarter of 2008, while the net result was negative for 3.4 million euros (-2.2 million euros in the first quarter of 2008).

The slowdown in results registered in the quarter was attributable both to lower revenues from white diesel fuel Gecam and to structural costs related to expansion of the particulate filters business. In the first three months of 2009 the Company sold 903 Feelpure filter systems compared with 122 systems sold in the corresponding period of 2008, with sales concentrated essentially in Italy and the Netherlands, countries where these systems obtained homologation in 2008.
The homologation processes underway in Germany and in China are moving towards their final phases, after which the company will enter markets with high growth potential. To this end, during the quarter the Group definitively launched its manufacturing site in Bumbesti Jiu, in Romania, which will allow it to serve both the markets that are already active and those where homologation is expected, with benefits foreseen in particular in the second half of the year.

During the quarter, Pirelli Eco Technology began installation of particulate filters on public transportation buses in Piedmont and by the end of September 2009 the Company, with the support of the Piedmont Region as part of its air quality improvement program, will install the filters on 879 regional vehicles.

Pirelli RE

The economic performance in the first quarter of 2009, though still negative, was improving compared with the last quarter of 2008.

Total rents as of 31 March 2009 amounted to 201.5 million euros, in line with expectations (143.1 million euros in the first quarter of 2008, with a perimeter that did not include the Highstreet portfolio). The Pirelli RE pro-quota share of rents equaled 47.3 million euros (compared with 38.1 million euros in 2008).

Real estate sales amounted to 174.8 million euros (199.8 million euros in the first quarter of 2008): the Pirelli RE pro-quota share of sales equaled 50.5 million euros (compared with 66.9 million euros in 2008). The sales margin was 17% (in the first quarter of 2008 it was 26%).

Consolidated revenues stood at 53.8 million euros, compared with 74.7 million euros as of 31 March 2008.

EBIT including income from investments amounted to - 14.7 million euros, compared with 22.5 million euros in the first quarter of 2008, excluding restructuring costs and writedowns.

In terms of EBIT, the decline with respect to 2008 (24.9 million euros) was composed of savings obtained on the structure (10.0 million euros), more than compensated for by main negative components such as: the presence in 2008 of an indemnity received vis a vis the commitment to cede management of the Berenice fund (17.0 million euros); the presence in 2008 of extraordinary items (3.5 million euros); worse results of consolidated vehicle companies mainly due to a decline in sales (5.6 million euros); a lower result of the Non Performing Loans services platform (5.8 million euros).

In terms of income from investments, the decline (equal to 12.3 million euros) was attributable for 10.0 million euros to results of the vehicles and funds linked mainly to lower sales margins, and for about 2.3 million euros for adjustment to fair value of interest rate hedging instruments.

Attributable net income stood at -15.8 million euros (+11.6 million euros in the first quarter of 2008, when discontinued operations had brought a benefit of 0.7 million euros).
Attributable net equity as of 31 March 2009 amounted to 317.1 million euros compared with 361.7 million euros as of 31 December 2008. The decrease of 44.6 million euros can be mainly linked to the attributable net result (-15.8 million euros) and to the variation in reserves for interest rate hedging (-25.1 million euros).

The net financial position as of 31 March 2008 was negative for 309.3 million euros, compared with 289.5 million euros as of 31 December 2008 (negative for 300.3 million euros as of 31 March 2008). The financial position excluding shareholder loan credits was negative for 898.4 million euros, compared with 861.8 million euros at 31 December 2008 (negative for 807.8 million euros on 31 March 2008).

Total net capital invested by Pirelli RE amounted to 1.3 billion euros of which 0.2 billion for NPLs and 1.1 billion for real estate (of which 73% in Italy and 27% in Germany).

It should be recalled, with regard to the first quarter of 2008, that the figures have been redetermined, for a correct representation, on a like-for-like perimeter. The Integrated Facility Management business, sold in 2008, has been considered "discontinued operations", helping to determine only the attributable net result and not the operating result.

Other businesses

Pirelli Broadband Solutions , the company in the Group operating in the field of solutions for broadband access, reported revenues of 44 million euros as of 31 March 2009, up 55.5% compared with the first three months of 2008 (28.3 million euros). EBIT was positive for 2.5 million euros compared with a positive result of 1.1 million euros as of 31 March 2008, while net income was positive for 2.8 million euros compared with a negative result of 1 million euros in the like period of 2008. The improvement was related to greater sales volumes and the positive effect of the product mix sold.

Prospects for the current year

The results for the first quarter of 2009 are in line with the targets announced at the time of the presentation of the 2009-2011 industrial plan on 11 February. In particular revenues of 4.3 billion euros are expected, with an increase in the weight of the component linked to environmental businesses to 25% from 19% at the end of 2008. The ROS ratio is forecast at 4.5%-5%. The net financial position at the end of the year is expected to be negative for about one billion euros, essentially in line with the end 2008 level.

New management incentive plan

The Board of Directors, following a positive opinion expressed by the Remuneration Committee, approved a new incentive plan for approximately 80 senior managers.

In line with the economic scenario, management level has been involved in the restructuring program of the Group. Revision of the structure has determined, over the last 12 months, a reduction of the number of managers by about 20%. For 2008, in addition, a policy of zero incentives was applied, as well as a block on retribution policy for 2009 internationally. These actions have determined an average contraction of about 20% in total managers' remuneration.

The aim of the new plan is to ensure a stronger and more direct link between retribution of Pirelli managers and their ability to produce value and results, in the short term, but especially in the medium and long term. The new system of incentives in the Pirelli Group in fact, links their compensation to reaching the economic and financial targets announced in the 2009-2011 industrial plan.

The incentive mechanism, in particular, foresees that participants waive 50% of their annual incentive pay, which will be invested, and will allow for a bonus to be paid in March 2012 only if the three-year results are reached. If not, the value invested will be cut significantly. The three-year incentive in support of the industrial plan will not produce any payment until March 2012; with the new plan put into effect today, the variable portion of compensation directly linked to results will on average amount to more than 40% of total remuneration of management, reaching 64% for top management. About 75% of the variable compensation will thus be exclusively linked to reaching the three-year goals.

The plan also foresees a link with Total Shareholder Return, in order to ensure greater alignment between the performance of management and the expectations of shareholders.
The economic targets of the plan, finally, include the cost of the incentivation.

Relevant facts which occurred after 31 March 2009

- Redemption of bonds maturing

On 7 April 2009 the 150 million euro bond issued by Pirelli & C. SpA in 1999 at a fixed rate of 5.125% was redeemed.

- Change in management at Pirelli RE
On 8 April 2009 Carlo A. Puri Negri left the post of Executive Vice President of Pirelli RE. At the same time, Giulio Malfatto entered the Group with the role of Managing Director of Pirelli RE, with responsibility for the business, while Claudio De Conto, Managing Director Finance maintains responsibilities for supervision and direction in financial areas.

-Sale of Telecom Italia shares

In the month of April, 44.7 million Telecom Italia shares were sold on the market for about 47 million euros.

Conference call

The results of operations as of 31 March 2009 will be illustrated today at 5:30 p.m. during a conference call in which the Chairman of Pirelli & C. SpA, Marco Tronchetti Provera, will intervene. Journalists will be able to follow the presentation by telephone, without the possibility to ask questions, by calling the number +39.06.3348.5042 .
The presentation will also be available via webcast - in real time - on the website www.pirelli.com in the Investor Relations section, where it will be possible to consult the slides.

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Pirelli: variation in corporate events calendar

Wed, 15 Apr 2009 19:35:00 +0200

Pirelli: variation in corporate events calendar Milan, 15 April 2009 - Pirelli & C. SpA communicates that the Board of Directors' meeting for review of the interim financial report as of 31 March 2009 will be held on Tuesday 21 April 2009, and not on 7 May as previously announced.

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Pirelli: lists for appointment of new Board of Statutory Auditors

Mon, 06 Apr 2009 17:20:00 +0200

Pirelli: lists for appointment of new Board of Statutory Auditors Milan, 6 April 2009 - With reference to the ordinary shareholders' meeting of Pirelli & C. SpA called for 20 April 2009 upon first call and for 21 April 2009 upon second call, for resolution upon, among other things, the appointment of members of the Board of Statutory Auditors, the Company notes that only one list of candidates was presented before the deadline by participants of the shareholders' pact of Pirelli & C. SpA.
The list of candidates follows:

Section 1 - standing Statutory Auditors
1. Enrico Laghi
2. Paolo Domenico Sfameni
3. Paolo Gualtieri

Section 2 - alternate Statutory Auditors
1. Luigi Guerra
2. Franco Ghiringhelli

The documentation called for by governing law, presented together with the list, will be made available to the public at the offices of the Company and of Borsa Italiana SpA, and published on the internet site www.pirelli.com today.

The Company also notes that, in accordance with governing law, the deadline for presentation of lists of candidates for appointment of the members of the Board of Statutory Auditors is thus extended to 10 April 2009, and the minimum threshold of participation required for presentation of lists is reduced to 1% of ordinary shares.

Shareholders intending to file minority lists before the new deadline indicated above must present, together with the documentation required by the By-laws and governing laws and regulations, a declaration attesting to the absence of relations linking them to the participants of the Pirelli & C. SpA shareholders' pact which presented the majority list.

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Pirelli sells its stake in Alcatel-Lucent Submarine Networks

Tue, 24 Mar 2009 16:40:00 +0200

Pirelli sells its stake in Alcatel-Lucent Submarine Networks Milan, 24 March 2009 - Alcatel-Lucent and Pirelli reached an agreement for sale of the stake held by Pirelli in Alcatel-Lucent Submarine Networks, a company operating in submarine telecommunications systems, to Alcatel-Lucent.

The transaction was carried out following Pirelli's exercise of a put option agreed on between the two companies in 2004, at the time of the agreement where Alcatel acquired certain Pirelli assets in submarine systems. The sale, for an overall value of 56 million euros, will occur in three tranches by the end of 2009.

Pirelli's withdrawal from the business is coherent with the strategy of focusing on its core business as announced by the Group on the occasion of the presentation of the 2009-2011 industrial plan.

Pirelli
Pirelli & C. SpA is the company listed on the Italian stock exchange that is parent company of a multinational group active in more than 160 countries with industrial experience of more than 135 years. In the tyre industry, Pirelli Tyre is the fifth largest manufacturer in the world in revenue terms and is a leader in high end segments, with 23 factories in 12 countries around the world. In real estate, Pirelli RE has businesses primarily in Italy and Germany. Thanks to a focus on technology and research, in the last few years the Group has started up initiatives with high innovation content, such as in sustainable mobility and renewable energy, with Pirelli Eco Technology and Pirelli Ambiente. Pirelli Broadband Solutions offers broadband access solutions, while Pirelli Labs is the advanced research center at the services of all Pirelli's businesses.

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Pirelli becomes title sponsor of the Chinese Super League

Fri, 20 Mar 2009 10:30:00 +0200

Pirelli becomes title sponsor of the Chinese Super League Preliminary agreement for three-year sponsorship signed today by
Giuseppe Cattaneo, CEO of Pirelli China, and Lv Feng of CSL

Beijing, 20 March 2009 - Starting this year and for the next three years, Pirelli will become the institutional sponsor of the Chinese Super League (CSL), the top professional football championship league in China, organized by the Chinese Football Association (CFA). The Championship will thus be called the "Pirelli Super League".

The preliminary agreement for sponsorship of the CSL was signed today by Giuseppe Cattaneo, CEO of Pirelli China, and by Lv Feng of CSL.

Officially created in 2004 from the evolution of the previous A1 championship, the Chinese Super League will represent the professional sports event with the largest following in the country thanks to the growing popularity of football, among the sports that now count the greatest numbers in China in terms of both players and fans. Last year there were more than 150 million television viewers, while fans physically present at each match reached a number close to 15,000.

CSL today includes 16 teams which play 30 matches between March and November. The season kickoff will take place tomorrow at the Hanghai stadium in Zhengzhou, with a major live television event with the presence of 20,000 fans.

Pirelli, which has had an industrial presence in China since 2005, when the first part of its factory was inaugurated in the Shandong Province, today counts two manufacturing lines in China which produce tyres for cars and trucks in the city of Yanzhou. Pirelli is present in China with a series of initiatives that contribute to its brand awareness, such as the presentation of the 2008 Pirelli Calendar in Shanghai, and other cultural initiatives. The company desires, with this sponsorship, to strengthen its image through sports.

Pirelli has a long tradition in the world of sports. In football, in particular, Pirelli has a relationship going back more than ten years with Inter, is the partner of Swiss team Basel, and has made sponsorship agreements in the past with the Palmeiras Brazilian team and the Argentine club Velez Sarsfield.

Pirelli specializes in high performance tyres and is the brand of choice for car manufacturers such as Ferrari, Maserati and Lamborghini. The link between powerful performance and football makes CSL a natural partner for Pirelli.

Pirelli intends to support Chinese football through this sponsorship, accompanying its evolution and offering international know-how in an active partnership. The company thus confirms its strategy of greater integration in the Chinese community and social fabric.

"China is one of the markets leading the world economy. Sponsorship of the CSL is a great opportunity for a company like ours with an important industrial presence and a relationship with the local community which over time has become more and more deeply rooted. The popularity of football, and its power to bring people together, make it the ideal vehicle to contribute to bringing the Pirelli brand into the hearts and homes of Chinese people," said Marco Tronchetti Provera, Chairman of the Pirelli Group.

CSL said Pirelli was the ideal partner. "We are delighted to welcome such a world-renowned company as title sponsor of CSL" said Mr. Nan Yong, the Vice President of CFA. "With today's announcement, Pirelli Super League - CFA will provide beautiful football games over next three years, to the continued delight of fans in China".

The Board of Directors approves draft 2008 Financial Statements

Tue, 10 Mar 2009 13:40:00 +0200

The Board of Directors approves draft 2008 Financial Statements The Board of Directors of Pirelli & C. Spa Approves Draft 2008 Financial Statements

Revenues Stable at 4,660.2 million euros ( -0.1% on a Like-For-Like Basis Net of The Exchange Rate Effect)
Ebit before Restructuring Charges: 187.4 Million Euros (364 Million Euros in 2007); Ebit after Restructuring Charges 43.2 Million Euros
Net Result: -412.5 Million Euros (+323.6 Million Euros In 2007) after Restructuring Charges Of 144.2 Million Euros, Writedowns of Real Estate Assets of 136 Million Euros, Writedowns Of Equity Participations of 263 Million Euros (173 Million Euros for Telecom Italia)
Attributable Net Result: -347.5 Million Euros (+164.5 Million Euros in 2007)
Net Financial Position Negative for 1,027.7 Million Euros, Stable Compared with 30 September 2008
Pirelli Tyre: Ebit before Restructuring Charges 250.7 Million Euros and Positive Net Result of 25.6 Million Euros

Milan, 10 March 2009 - The Board of Directors of Pirelli & C. SpA, which met today, reviewed and approved 2008 draft financial statements.

The fiscal year was heavily conditioned by the international financial crisis, which determined a marked slowdown in the world economy with a harsh impact on the automotive and real estate industries. In order to confront that scenario, the group launched profound restructuring actions during the course of the year, accelerating in the fourth quarter when faced with prospects which for 2009 as well impose measures that can guarantee efficiency and competitiveness.

Overall, the Group closed the year with revenues essentially stable on a like-for-like basis and net of exchange rate effects, and declining EBIT, though still positive even after restructuring charges, compared with 2007. The net result, a loss of 412.5 million euros, reflected restructuring charges of 144.2 million euros, writedowns of real estate assets for 136 million euros, and writedowns of listed financial assets for 263 million euros, of which 173 million euros for the Telecom Italia stake.

In the core tyre business, Pirelli Tyre, notwithstanding a heavily negative scenario, closed 2008 with slightly higher revenues on a like-for-like basis and net of exchange rate effects, and a net profit, though significantly lower than in the previous year. Margins were affected by the increase in raw materials prices, which in 2008 brought greater costs of about 200 million euros, as well as the crisis in the automobile industry, which hurt the original equipment channel. In order to contrast that scenario, the company initiated restructuring actions to strengthen the competitiveness of the industrial footprint in Europe and reduce costs of central structures.

In real estate, the market suffered from a year of serious international crisis. Falling prices, a slowdown in transactions, and the credit crunch penalized all companies in the industry. In order to confront the changed scenario, Pirelli RE announced at the end of last year a process of cost cutting and reorganization focused on the two territorial macro areas of Italy and Germany/Poland, less exposed to the volatility of the real estate market, to relaunch the businesses and bring value to the high-quality assets in the portfolio.

Pirelli & C. SpA Group

At consolidated level, revenues as of 31 December 2008 amounted to 4,660.2 million euros, in line with (-0.1%) on a like-for-like basis, and net of exchange rate effects (-3% including those effects) compared with the 4,780 million euros of 2007 without considering revenues relating to deconsolidation of real estate assets of DGAG. Including the DGAG effect, revenues as of 31 December 2007 amounted to 6,075.6 million euros. Revenues generated from "green" products accounted for 19% of the Group total at year end.

EBITDA before restructuring charges stood at 396.1 million euros, compared with 572.8 million euros in 2007.

EBIT before restructuring charges was 187.4 million euros compared with 364 million euros in 2007.

The decline in EBIT before restructuring charges compared with 2007, net of the change in consolidation perimeter (-21.4 million euros for the DGAG effect) and net of writedowns of real property of Pirelli RE (-9 million euros), was 146.2 million euros and was mainly due to the performance of Pirelli Tyre (-107.4 million euros was the change in EBIT before restructuring charges compared with 2007) and of Pirelli RE (-29.7 million euros), which suffered from the difficult market scenario (declining volumes in Europe and North America together with significant growth in manufacturing factor costs for tyres, and a slowdown in transactions for the real estate business).

EBIT amounted to 43.2 million euros including restructuring charges for the full year, which amounted to 144.2 million euros and were due to rationalization of staff and of the manufacturing base in Europe for Pirelli Tyre, and of rationalization of structures for Pirelli RE.

In 2008 the Group, taking into account the negative performance of financial markets, adjusted its book value of equity participations in listed companies with writedowns of 263 million euros, of which 173 million euros relating to the stake in Telecom Italia, 66 million euros for RCS Mediagroup and 24 million euros for Avanex.
The slowdown in the real estate market triggered real estate writedowns by Pirelli RE of a total of 136 million euros.

These dynamics affected EBIT including income from equity participations, which was negative for 323.3 million euros compared with +512.6 million euros in 2007.

The net result of operational business activities was negative for 475.9 million euros, compared with a positive value of 255.8 million euros at the end of 2007. The result of business operations sold was positive for 63.4 million euros and included the sale of Pirelli Real Estate Facility (+74.6 million euros), and the sale of the photonics business (-11.2 million euros).

The total net result was a loss of 412.5 million euros, compared with a net profit of 323.6 million euros in 2007. The net result attributable to Pirelli & C. SpA was a loss of 347.5 million euros compared with an attributable net profit of 164.5 million euros in 2007.

Consolidated net equity as of 31 December 2008 was 2,374.4 million euros, compared with 3,804.1 million euros at the end of 2007. Net equity attributable to Pirelli & C. SpA on the same date was 2,171.8 million euros (0.405 euros per share) compared with 2,980.2 million euros (0.555 euros per share) at the end of 2007.

The net financial position of the Group as of 31 December 2008 was negative for 1,027.7 million euros. The 2008 figure was affected by, in particular, the repurchase of 38.9% of Pirelli Tyre (835.5 million euros) and the repurchase of Turkish minorities (43.3 million euros) as part of a strategy to strengthen the tyre business, as well as the payment of dividends (168 million euros). At the end of 2007 the net financial position was positive for 302.1 million euros. The net financial position at corporate level as of 31 December 2008 was positive for 537 million euros. As of 31 December 2008, a total of 785 million euros of committed credit lines was available, which, together with balance sheet liquidity (370 million euros), allow the group not to have a need to refinance for the next two years.

In 2008 the Group confirmed its attention to research and development, where spending amounted to 156 million euros, with an incidence on sales of 3.3%.

Employees of the Group as of 31 December 2008 counted 30,980 compared with 30,813 as of 31 December 2007.

Parent company Pirelli & C. SpA closed the fiscal year with a loss of 189.5 million euros affected directly or indirectly by the writedowns on listed equity participations for 263 million euros. Thus it is not foreseen that any dividend will be distributed. The loss will be covered through the use of existing reserves.

It should be noted that the photonics business and that of Integrated Facility Management of Pirelli RE, sold during the year, are considered "discontinued operations" and thus contribute only to the net result. For homogeneity of representation, the comparison with 2007 data is done on a like-for-like basis.

Pirelli Tyre

Revenues of Pirelli Tyre as of 31 December 2008 amounted to 4,100.2 million euros, down 1.5% compared with 2007 (4,161.7 million euros). The organic variation (net of exchange rate effects) was a 1.3% increase, thanks to good performance of the price/product mix component (+7.3%), deriving from a continuing focus on the highest product segments and price increases that compensated for a decline in volumes (-6% compared with 2007).

EBITDA before restructuring charges was 441.2 million euros, down 19.6% compared with 548.6 million euros in 2007. EBIT before restructuring charges stood at 250.7 million euros, down 30% compared with 358.1 million euros in 2007.
The reduction in EBIT compared with 2007, notwithstanding good commercial performance in terms of price/mix, was due to a market scenario that was unfavourable in volume terms in Europe and North America, combined with a strong increase in costs of manufacturing factors, in particular of raw materials, up 195 million euros compared with 2007 (150 million euros in the second half).
Restructuring actions begun in Europe in order to effectively confront this scenario and strengthen the competitive footprint brought about charges of 100 million euros in 2008, of which 68 million euros in the last quarter of the year. Considering restructuring charges, 2008 EBIT amounted to 150.7 million euros.

The dynamics described, together with greater financial charges, affected net profit, which amounted to 25.6 million euros as of 31 December 2008, compared with 210.5 million euros at the end of 2007.

The net financial position was negative for 1,266.8 million euros, compared with a negative 559.6 million euros at the end of 2007. The change was mainly related to the payment of dividends (93 million euros), consolidation of net debt of Speed (409 million euros) following the merger with Pirelli Tyre which took place at year end, the purchase of minorities in Turkey (43 million euros) and absorption of cash (161 million euros) deriving from ordinary business activity.

In the Consumer business (Car/Light Truck and Motorcycle Tyres), revenues stood at 2,801 million euros overall, - 2.1% compared with 2007 due to the negative performance of volumes (-5.8% mainly in Europe and in North America. In this context Pirelli Tyre focused on higher product segments with a consequent positive variation of price/mix (+6.5% at annual level), which compensated for the negative trend in volumes. Net of exchange rate effects, organic growth of Consumer revenue stood at +0.7%. Operating income from ordinary operations was 139 million euros compared with 253 million euros in 2007, affected by the above-mentioned decline in volumes and the strong increase in raw materials costs.

In the Industrial business (Tyres for Industrial Vehicles and Steelcord) revenues were 1,299 million euros overall, in line with 2007 (1,300 million euros). The decline in volumes was greater in the Industrial segment (-6.6% compared with 2007) in consideration of the highly cyclical nature of the business (greater correlation with macroeconomic trends and with those of certain specific sectors, such as public works, large construction projects, etc.); this performance was more than compensated by the positive variation in price/mix (+9.1% compared with 2007) with consequent revenue growth in organic terms (net of exchange rate effects) of 2.5%. Operating income from ordinary operations amounted to 112 million euros, slightly higher than the 106 million euros in 2007 thanks to the positive strategic positioning of Pirelli Tyre with 87% of overall production in low cost areas and 75% of sales in emerging markets.

Net investments amounted to 285 million euros (262 million euros in 2007) and, coherently with the Group's strategy and market demand, were utilized for developing innovative processes, increasing production in China and Romania, and developing new "green performance" products.

Pirelli Tyre maintained relatively flat its costs for Research and Development (145 million euros compared with 148 million euros in 2007), keeping its focus on all ongoing activities in product and process innovation.

The headcount of Pirelli Tyre as of 31 December 2008 was 28,601 compared with 27,224 at the end of 2007. The increase was a consequence of investments made by the Group in areas such as Brazil, China and Romania.

Pirelli RE

At the end of 2008 assets under management of Pirelli RE had a market value of 17.3 billion euros, of which 15.4 billion euros in properties (12.6 billion euros as of 31 December 2007) and 1.9 billion euros in non-performing loans - NPL (2.4 billion euros as of 31 December 2007).
The increase in properties, from 12.6 billion to 15.4 billion euros was due to acquisitions (of approximately 5 billion euros, of which the Highstreet portfolio accounts for 4.6 billion euros), the transfer of management of the Berenice and Teodora funds to another fund manager (-1 billion euros), property writedowns (-0.6 billion euros), sales (-0.9 billion euros) and other changes (+0.3 billion euros).

Rents totalled 669.2 million euros (535.8 million euros in 2007), of which Pirelli RE's portion was 164.9 million euros compared with 158.3 million euros in 2007.
Real estate sales in 2008 amounted to 864.9 million euros (1,804.9 million euros in 2007), of which the Pirelli RE portion was 361.8 million euros (526.8 million euros in 2007). The sales margin was 19% (22% in 2007).

Consolidated revenues amounted to 365.1 million euros, compared with 334.1 million euros as of 31 December 2007 (net of DGAG).

EBIT including net income from equity participations, before restructuring costs and property writedowns/revaluations, was negative for 59.7 million euros compared with a positive 83.6 million euros in 2007 (net of DGAG). The decrease of 143.3 million euros comprised 29.7 million euros in lower EBIT and for 113.6 million euros in lower income from equity participations (mainly attributable to 74 million euros in lower sales volumes, 21.6 million euros in lower success fees from capital activities and 18 million euros in fair value adjustments on interest rate hedging instruments).
Restructuring carried out in 2008 cost 44.2 million euros; writedowns booked in 2008 amounted to 135.8 million euros, compared with 67.5 million euros in revaluations in 2007; EBIT including net income from equity participations was therefore a negative 239.7 million euros (compared with a positive 151.1 million euros in 2007, net of DGAG).

Consolidated net income amounted to a negative 195 million euros (compared with a positive 162.8 million euros in 2007, net of DGAG), including 74.6 million euros deriving from discontinued operations, following the sale of the equity participation in Integrated Facility Management.

The NAV of real estate assets attributable to Pirelli RE amounted to 0.8 billion euros, the balance between its pro-quota portion of the market value of the assets held by Pirelli RE (3.8 billion euros) and its portion of the net financial positions of the same, equal to 3 billion euros.

Attributable net equity as of 31 December 2008 amounted to 361.7 million euros, compared with 715.7 million euros at the end of 2007: the reduction mainly reflected the net consolidated loss (-195.0 million euros), the distribution of dividends (-85.1 million euros) and the decrease in the reserve for interest rate hedges (-54.4 million euros).

The net financial position at the end of 2008 was negative for 289.5 million euros, improved by 34.3 million euros since 30 September 2008 (negative for 289.7 million euros as of 31 December 2007). The adjusted net financial position (excluding shareholder loans to companies in which minority shareholding were held) was negative for 861.8 million euros, improved from 934.5 million euros as of 30 September 2008 (816.1 million euros as of 31 December 2007). The gearing ratio went from 1.52 at the end of September 2008 to 2.35 on 31 December 2008 (1.13 at the end of the previous year).
The total net financial position of real estate funds and vehicle companies invested in by Pirelli RE as of 31 December 2008 amounted to 11.3 billion euros, of which 10.1 billion euros of bank debt and 1.2 billion euros of shareholder loans. The total net financial position of the NPLs amounted to 1.7 billion euros.

Pirelli RE's total share of the financial position of the funds and investment vehicles was 3.6 billion euros (of which 0.4 billion euros of shareholder loans relating to real estate and 0.2 billion euros in shareholder loans relating to NPLs). Bank debt of 3 billion euros was comprised of 2.6 billion euros for real estate and 0.4 billion euros for NPLs. This debt, which has an average residual life of 3.6 years, is secured against the properties and NPLs underlying the loans.

The Group had, excluding temporary workers, 1,473 employees as of 31 December 2008 (2,956 at the end of 2007, of whom 1,168 working in businesses sold in the year, primarily the Integrated Facility Management joint venture sold on 23 December).

It should be noted that the activities of Integrated Facility Management, sold during the course of the year, are considered "discontinued operations" and thus contribute only to the net result. For homogeneity of representation, the comparison with 2007 data is on a like-for-like basis.

Other businesses

In 2008 revenues of Pirelli Broadband Solutions, the company in the Group that operates in solutions for broadband access, amounted to 124.6 million euros, up 10.8% compared with 112.5 million euros in 2007. EBITDA was positive for 4.8 million euros, compared with 1.9 million euros in 2007, while EBIT was positive for 3.9 million euros, decidedly stronger than the 0.9 million euros of 2007. Net profit stood at 2 million euros (after financial charges of 2.6 million euros), compared with a loss of 2.6 million euros in 2007.

Pirelli & C. Eco Technology, the company in the Group which operates in the area of sustainable mobility - especially particulate filters - had 2008 revenues of 62.9 million euros compared with 67.4 million euros in 2007. EBIT was negative for 11.8 million euros (-3.8 million euros in 2007) and included the increase in structural costs due to internationalization of the retrofit filters business and costs sustained for the start-up of the particulate filter factory in Romania. In 2008 activities relating to development and marketing of post-treatment diesel filter systems greatly intensified.

For Pirelli & C. Ambiente sales revenue amounted to 5.1 million euros compared with 2.7 million euros in 2007, with negative EBIT of 2.6 million euros (3.6 million euros in 2007). In the photovoltaic sector, where the company operates with its venture Solar Utility, the company had volumes of current initiatives and those under development for generators of total power of about 50Mw, of which 3.1Mw finished and 9Mw being built in 2009.

Direction and co-ordination of Pirelli & C. Real Estate SpA
The Board of Directors, having reconsidered its previous assessments, found that - including following recent changes made to the organizational structure and the nature of operations which call for increased involvement in business activities and functions of the subsidiary Pirelli & C. Real Estate SpA - there is now a direction and co-ordination activity exercised by Pirelli & C. vis a vis the subsidiary, pursuant to article 2497 et seq of the Italian Civil Code. This matter was already evaluated during the Board meeting of Pirelli & C. Real Estate SpA.

Shareholders' meeting

The Board of Directors resolved to call the Shareholders' meeting for approval of the financial statements for the 2008 fiscal year on 20 April (first call) and 21 April (second call).

The ordinary Shareholders' meeting will additionally be called upon to resolve upon appointment of the Board of Statutory Auditors according to a list system.

Prospects for the current year

In a macroeconomic scenario that continues to present critical elements and uncertainties, the Pirelli Group has already begun, and will continue to develop, the necessary measures to increase its competitiveness and to improve efficiency. For 2009, as announced on occasion of the presentation of the 2009-2011 industrial plan on 11 February, Pirelli expects revenues of about 4.3 billion euros, of which 25% linked to environmental businesses, up from 19% at the end of 2008. ROS is targeted at 4.5%-5%. The net financial position at the end of the year is expected to be negative for about one billion euros, essentially in line with the level at the end of 2008.

Noteworthy events which occurred after 31 December 2008

Technology collaboration with Brembo and Magneti Marelli

On 27 January Pirelli announced the start of technological collaboration with Brembo and Magneti Marelli for development of cutting edge solutions for the Italian and international automotive industry. The skills and excellence of the three groups will allow for significant synergies to be realized and for development of applications, in particular in the field of automobile safety and for reduction of environmental impact, in line with the evolution of international regulations and with new European Union C02 emissions limits to start in 2012.

Presentation of the 2009-2011 industrial plan

On 11 February the Pirelli Group presented guidelines for its 2009-2011 industrial plan. The goal in the three-year period is a transformation that brings the Group to greater focus on its core businesses (Pirelli Tyre and the particulate filters of Pirelli Eco Technology), to be a "green performer" in its business sectors and to have the financial flexibility to sustain growth.

Proposed capital increase of Pirelli RE

On 5 March the Board of Directors of Pirelli RE confirmed the resolutions adopted in February by approving an operation designed to strengthen the capital structure and to support its new business model, with a proposal to make a divisible increase in share capital for cash payment, to be offered in pre-emption to shareholders, for a maximum amount of 400 million euros.
As for the terms of the increase, it is envisaged that the shareholders' meeting will give the Board a mandate to set, among other things, the issue price with reference to the theoretical "ex rights" price (TERP) of Pirelli RE ordinary shares, and the stock's performance in view of prevailing market conditions, as well as the market practice for similar transactions. Furthermore the issue price of the new shares may not be less than their nominal value, as provided for by law.
On 10 February the parent company, Pirelli & C., expressed its full support for the capital increase, committing itself to underwriting its share of the rights and declaring its willingness to underwrite any shares which, at the end of the offer process, are not underwritten. Pirelli & C. will fulfil its commitment by converting part of its loans to Pirelli RE into equity.
It is foreseeable that the transaction will be completed in the first half of the current year, assuming that it receives the approval of the extraordinary shareholders' meeting called together with the ordinary shareholders' meeting, which, among other things, will resolve upon approval of the financial statements as of 31 December 2008, and that the required authorizations are also obtained from the relevant authorities. The legally required documentation will be published within the necessary deadline.

Bonds maturing in the 18 months after 31 December 2008
On 7 April 2009, the 150 million euro bond loan issued by Pirelli & C. SpA in 1999 at a fixed rate of 5.125% will mature.

The Manager mandated to draft corporate accounting documents of Pirelli & C. S.p.A., Claudio De Conto, declares - as per art. 154-bis, comma 2 of the Testo Unico della Finanza - that the accounting information contained in this press release corresponds to the documented results, books and accounting registers.
***

The 2008 financial results will not be discussed on a conference call with analysts and investors, given that the preliminary 2008 figures and relating business dynamics were already illustrated to the financial markets on 11 February on occasion of the presentation of the 2009-2011 Industrial Plan. This press release and presentation of 2008 financial results will be available on the website www.pirelli.com.

PDF Version (311KB)

Pirelli: Press release

Fri, 20 Feb 2009 14:48:00 +0200

Pirelli: Press release Milan, 20th February 2009 - With regard to comments on possible Pirelli transactions on Continental, the company declares that no transaction has been defined even along general outlines.

The company also points out that, consistent with the financial rigor foreseen by the guidelines of the recent 2009-2011 industrial plan, any possible future transaction of a strategic nature would not comport any recourse to the market.

PDF Version (82KB)

Pirelli Group 2009-2011 Industrial Plan

Wed, 11 Feb 2009 07:44:00 +0200

Pirelli Group 2009-2011 Industrial Plan

Preliminary Consolidated 2008 Figures

Consolidated Revenues In Line With 2007,
Positive Operating Result, Though Down Compared With 2007 Figure Due To Higher Raw Materials Costs, Falling Demand And Restructuring Expenses;
Net Financial Position In Line With Q3 2008;
Negative 2008 Economic Result For Pirelli Re, Mainly Due To Writedowns And Restructuring

2009-2011 Industrial Plan

The Group Restructures And Reorganizes Its Businesses;
Transformation Process For The Three-Year Period Launched, With
Focus On Core Businesses (Tyres And Particulate Filters);
Technology And Innovation Push;
The Group Aims To Be A "Green Performer"
Reorganization of Pirelli Re Accelerated:
Capital Increase Proposed For A Maximum Of 400 Million Euros
Pirelli To Underwrite Pro-Quota, Available To Take Up Any
Shares Not Underwritten;
Concentration Of Italian Real Estate Management And Services Under The Group's Asset Management Company ("Sgr");
In The Three-Year Period Possible Strategic Partnerships For Pirelli Re For Management Of Italian And German Real Estate Patrimony

Milan, 11 February 2009 - The Board of Directors of Pirelli & C SpA and the Board of Directors of Pirelli & C. Real Estate SpA:

o reviewed the preliminary unaudited 2008 financial statements;

o approved the 2009-2011 industrial plan

The Board of Directors of Pirelli RE also reviewed a proposal for a capital increase to strengthen the equity structure and sustain the new business model, and took note of the full agreement on the transaction expressed by the Board of Directors of Pirelli & C.

Consolidated preliminary 2008 data, Pirelli & C SpA Group

For the Pirelli Group, the 2008 fiscal year was heavily conditioned by the international financial crisis, which determined a major slowdown in the world economy with a severe impact on both the automotive industry and the real estate sector.

In order to confront that negative scenario, during the year the group began a profound restructuring action . In particular, in the fourth quarter , in consideration of economic prospects for 2009 as well, which impose measures that can guarantee conditions of maximum efficiency and competitiveness, the group felt it was opportune to accelerate these measures, with consequent further effects on economic results.

Taking into account the impact of this restructuring, the group closed the year with a slight decline in revenues, a positive operating result, though lower than in 2007, and a net financial position substantially in line with the figure for the first nine months of 2008.

Consolidated revenues amounted to 4,648 million euros, in line with the previous year(-0.5%) on a like-for-like basis, and net of the exchange rate effect (-3% inclusive of that effect), compared with 4,780 million euros in 2007 net of the sales relating to deconsolidation of real estate assets of DGAG. Considering the DGAG effect, sales as of 31 December 2007 amounted to 6,075.6 million euros.

EBITDA before restructuring charges amounted to 397 million euros, compared with 573.6 million euros in 2007. EBIT before restructuring charges stood at 188 million euros compared with 363.9 million euros in 2007. Considering restructuring charges for the whole year, amounting to 144 million euros , EBIT was 44 million euros. Restructuring charges were related to rationalization of staff structures and the manufacturing base in Europe for Pirelli Tyre, and to structural rationalization for Pirelli RE.

The consolidated net financial position as of 31 December 2008 was negative for 1,028 million euros (down slightly from 1,055.7 million euros as of 30 September 2008). The net financial position at corporate level was positive for 536 million euros. Among the elements affecting it during the year was the repurchase of 38.9% of Pirelli Tyre (835.5 million euros) and the purchase of Turkish minority shareholdings as part of the strategy to strengthen the tyre business (43.3 million euros), and the payment of dividends (168 million euros). As of 31 December 2007, the consolidated net financial position was positive for 302.1 million euros.

It should be noted that the photonics business, and the Integrated Facility Management business of Pirelli RE, sold during the course of the year, are considered "discontinued operations" and are therefore only part of the net result. For homogeneous representation, the comparison with 2007 data is done on a like-for-like basis.

Pirelli Tyre

Pirelli Tyre closed 2008 with revenues slightly up despite a heavily negative economic scenario. Margins suffered from the increase in raw materials prices, which in 2008 brought about greater costs of about 200 million euros , as well as from the crisis in the auto industry which affected the original equipment channel.
In order to counter that scenario, the company undertook restructuring actions , accelerated in the fourth quarter against further deterioration of the market, in order to strengthen the competitiveness of the industrial organization in Europe and reduce costs of central structures.

2008 revenues were 4,100 million euros, up 1.3% on a like-for-like basis, net of exchange rates (-1.5% including the exchange rate effect). EBITDA before restructuring charges stood at 443 million euros, down 19% compared with 548.6 million euros in 2007. EBIT before restructuring charges was 250 million euros, down 30% from 358.1 million euros in 2007. Considering restructuring charges for the entire year, equal to 100 million euros, EBIT was 150 million euros. The net financial position was negative for 1,266 million euros (559.6 million euros at the end of 2007) following the repurchase of minority stakes in the Turkish subsidiaries and the merger of Speed into Pirelli Tyre.

The fourth quarter , in particular, registered revenues of 870 million euros , down 5% on a like-for-like basis, and EBIT before restructuring charges - which in the fourth quarter alone amounted to 68 million euros - of 18 million euros compared with 71.9 million euros in the year earlier period.

Pirelli RE

In real estate, the market was in its second consecutive year of international crisis. The decline in prices, the slowdown in transactions and credit access difficulties penalized all the companies in the sector. In order to counter the changed scenario, Pirelli RE announced at the end of the year a process of cost cutting and reorganization focused on the two territorial macro-areas of Italy and Germany/Poland, aiming at relaunching the business activities and bringing out the value of the quality of assets in the portfolio.

Pro-quota aggregate revenues of Pirelli RE in 2008 amounted to approximately 776 million euros, down 18% compared with 2007 (they stood at 949 million euros net of the component relating to the deconsolidation of DGAG). Consolidated revenues were about 365 million euros (in 2007 they stood at 334.1 million euros net of DGAG). EBIT including the results of equity participations, before restructuring and revaluations/writedowns , was negative for about 60 million euros compared with a positive figure of 83.6 million euros in 2007 (net of DGAG).
EBIT including results of equity participations, restructuring and revaluations/writedowns , was negative for about 240 million euros (compared with a positive figure of 151.1 million euros in 2007 net of DGAG), of which about 136 million euros were writedowns and about 44 million restructuring costs; in 2007 there were revaluations for 67.5 million euros.

The net financial position at the end of 2008 was negative for about 289 million euros, in line with 289.7 million euros at the end of 2007 (as of 30 September 2008 it was negative for about 324 million euros). The net financial position, including shareholders' loans , was negative for about 862 million euros as of 31 December 2008, with an improvement of about 73 million euros compared with 30 September 2008 and about 46 million euros worse compared with 31 December 2007. The debt with controlling shareholder Pirelli & C SpA was reduced to about 490 million euros , compared with about 700 million euros as of 30 September 2008 and about 526 million euros as of 31 December 2007.

It should be noted that the activities of Integrated Facility Management of Pirelli RE, sold during the course of the year, are considered "discontinued operations" and therefore are only part of the net result. For homogeneous representation, the comparison with 2007 figures is on a like-for-like basis.

2009-2011 Industrial Plan

The Pirelli Group

In a macroeconomic scenario that continues to present critical elements and uncertainty, the Pirelli Group has already begun, and will continue to develop, the measures necessary to increase its competitiveness and improve its efficiency in the different sectors where it is present. The group will continue and intensify the actions of restructuring, reorganization and rationalization of the businesses, focusing on development of solutions that anticipate market demand, in particular in all the businesses related to definition and evolution of "green" technologies and products, in line with new environmental standards.

Through cost cutting, optimization of geographical presence, reorganization and rationalization of existing business activity and continuous attention to research and technology innovation, the solidity and flexibility of the group will be strengthened. The group will therefore be able to not only face the current economic crisis, but also to take advantage of new growth and development opportunities.

The objective for the three-year period is one of transformation, bringing the group to greater focus on its core businesses (Pirelli Tyre and the particulate filters of Pirelli Eco Technology), to be a "green performer" in its areas of activity and to have the financial flexibility to be able to sustain growth.

Thanks to skills already acquired, Pirelli will continue to develop products and solutions on the cutting edge in the "green economy", which offers important development opportunities in various sectors: sustainable mobility, eco-compatible building construction, renewable energy. At the end of the three-year period the incidence of the "green" component on revenues is expected to rise to about 40% of the total compared with about 20% today.

The reorganization and restructuring actions already begun by Pirelli Tyre will increase competitiveness of its industrial structure. The measures foreseen for the three-year period will allow the company to improve its profitability and continue to generate liquidity, making the most of a competitive advantage arising from a manufacturing presence in emerging markets that present higher growth rates and lower industrial costs.

Pirelli Eco Technology will leverage its technology to capture an important position in the particulate filter market both for commercial vehicles already in circulation and for new vehicles and, thanks in part to synergies with Pirelli Tyre, will develop within a rapidly growing market.

In the real estate sector the reorganization plan already launched at the end of 2008 will continue, with the adoption of a leaner structure concentrated on the geographical areas of Italy and Germany/Poland, capable of making the value of the assets in the portfolio emerge. The reorganization of Pirelli RE also foresees concentrating all Italian real estate services and portfolio management under the company's fund management company ("SGR"). The actions and the strategies adopted, together with know-how matured in the industry, will open the way for strategic partnerships for management of the Italian real estate patrimony. The proposed capital increase will allow for strengthening the equity structure and sustaining the new business model, protecting the value of the assets, which is currently unexpressed, while awaiting a recovery of the market, now heavily weighed down by the economic crisis.

Pirelli Labs will continue with advanced research in support of all the industrial activities of the group with an essential role in launching start-ups in business areas of interest which, thanks to the strength and value of the Pirelli brand, will be able to increase their value both through autonomous development projects and through aggregations with other market players.
An example of development of innovative businesses supported by the research at Pirelli Labs is the photovoltaic business of Pirelli Ambiente, with the opportunities offered by the growth of the renewable energy market.

The group will also continue to develop broadband access systems, to give Pirelli Broadband Solutions a portfolio of more and more innovative and complete products and services, and will be open to opportunities for aggregation with third parties that may arise which may further increase the value of the business.

The group has a solid financial structure, with a net financial position as of 31 December 2008 that was negative for 1,028 million euros and available, unutilized credit lines worth about 800 million euros and expiration dates allowing the company to have no need for debt refinancing for the next two years.

During the course of 2008 the group strengthened its core business with the repurchase of the 38.9% of Pirelli Tyre held by Speed for 835.5 million euros and the purchase of minority shares in Pirelli Tyre's Turkish subsidiaries for 43.3 million euros.

At corporate level the group has a positive net financial position of 536 million euros, the balance between debt of 511 million euros, available liquidity of about 110 million euros and credits with business units of about 930 million euros (in particular approximately 490 million euros with Pirelli RE and about 430 million euros with Pirelli Tyre, mainly attributable to the purchase of Speed).
Thanks to that solidity, the group will be able to on the one hand contribute to strengthening the equity structure of Pirelli RE, and on the other hand have flexibility, taking into account Pirelli Tyre's capacity to generate liquidity.

In the three-year period covered by the plan, a progressive improvement of the net financial position is expected: after a 2009 in which the NFP is expected to be in line with 2008, the group expects for the end of the period net debt, before any dividends, of less than 800 million euros, in part thanks to expected net cash generation of 250 million euros.

Pirelli Chairman Marco Tronchetti Provera said:
"The coming three years for Pirelli will be three years of transformation, which the group is prepared for thanks to acceleration of restructuring already begun in 2008. Today we can count on significant solidity of our equity base and on the efficiency of Pirelli Tyre, which will increase its profitability and continue to generate liquidity. The strengthening of Pirelli RE wll help bring out the value of its assets, not expressed today. Our course of growth will be ensured by further rationalization and focus on core businesses, with an increase in the "green" component of the business."

Group targets
2009:
Revenues: approximately 4.3 billion euros (of which 25% "green")
EBIT margin: 4.5 to 5%
Net financial position: negative for approximately 1 billion euros
2011 :
Revenues: 4.7 to 4.8 billion euros (of which 40% "green")
EBIT margin: approximately 8%
Net financial position: negative for less than 800 million euros (before any dividends, if any)

Pirelli Tyre

In a macroeconomic context where the tyre business is penalized by the effects of the international crisis, reorganization and restructuring actions already underway will allow Pirelli Tyre to improve the competitiveness of its industrial structure. The actions to be carried out in the three-year period will allow the company to improve profitability and continue to generate liquidity, using the competitive advantage of a manufacturing presence in emerging markets which present greater growth rates and lower industrial costs.

The company has responded rapidly to the unfavorable economic scenario, starting up and accelerating a restructuring plan which in 2008 brought about financial charges of 100 million euros and whose benefits will allow the company to meet the continued challenges in market conditions, already this year.

The strategy that will allow the company to reach its objectives includes:

Actions on costs

continuation of the plan already begun in 2008, with the goal of saving over 300 million euros in the three-year period. This will be through:

- rationalization of manufacturing structures and staff in Europe;
- renegotiation of raw materials purchasing agreements in order to take advantage of a phase of falling prices, following an increase in these costs of about 200 million euros in 2008;
- savings from lower energy costs and on logistics.

growth of manufacturing capacity in emerging markets, where the greatest demand and the lowest industrial costs (logistics, energy, cost of labour) are located. Examples are the Group's factories in China, where the start-up phase has been concluded, in Latin America, in Egypt, in Turkey and in Romania, and the presence in Russia.

- Industrial: Pirelli Tyre has 87% of its total production today in low-cost countries, where the company associates cost-competitive structures with the use of cutting-edge technology. This represents a unique competitive advantage with respect to the 50% average figure of Pirelli's four major competitors.

- Consumer: rationalization of geographical distribution, focusing high value added production in high-cost countries. This occurs already in Germany (Ultra High Performance - UHP, Winter, Runflat) and in the UK (SUV) and will be applied in the new high-tech production facility in Settimo Torinese (Turin) in Italy, where 155 million euros in investments are confirmed.

Actions on revenues

Skill in responding to demand in high growth markets, taking advantage of the competitive leverage of local presence and brand strength;
Development and launch of new products: premium, green performance and Cyber Tyre

               - Industrial: new product launches aim to increase market share (with particular attention to Russia, China and the Far East) and to confirm the leadership position in Latin America and the Mediterranean area. In addition the company aims to take advantage of opportunities offered by the Agro segment.
              - Consumer: the goal is to create value by confirming the selective partnership strategy in original equipment, which focuses on quality and profitability more than volumes, and reinforcing, in the replacement channel, Pirelli's leadership in the high performance segment. In addition, the company aims to take advantage of opportunities offered by the evolution of the market with 'green' products developed ad hoc in the various market segments, under the umbrella of the Cinturato brand and with innovative solutions for the auto industry, like the Cyber Tyre. In the motorcycle sector, essentially non-cyclical and representing a significant contribution to the profitability of the consumer sector, Pirelli expects to further consolidate its leadership position.

R&D and technology

The actions delineated above will be supported by R&D, with continuous technological evolution of products and manufacturing processes. In particular, with:

evolution of MIRS, Pirelli's robotized system for manufacturing tyres;
new ecological materials, among which silica derived from rice husk, with benefits both on the environmental front and on the cost front. Development of "green performance" products is foreseen for the various segments, strengthening in particular the leadership Pirelli already holds in the Premium segment;
technological partnerships with other actors in the sector. An example is the recent agreement signed with Brembo and Magneti Marelli for the Cyber Tyre, the tyre with an integrated chip which will make a significant contribution in terms of safety and reduction of fuel consumption. Pirelli has been working for some time with the contribution of some of the most prestigious research institutions, including Ispra, Milan's Politecnico University, Turin's Politecnico University, UC Berkeley, the University of Craiova, and Shandong University;
development of the technological and manufacturing facility in Settimo Torinese (Turin), to build a factory for production of the company's most technologically advanced and efficient 'green' tyres, within the context of a process that guarantees the highest standards of efficiency and productivity of the factory.

Targets
2009:
Revenues: - 6 to -7% compared with 2008
EBIT margin: 6.5 to 7%
Net financial position: negative for 1.2 billion euros (before dividends, if any)
2011:
Revenues: +9 to +10% compared with 2009
EBIT margin: 8 to 8.5%
Net financial position: negative for approximately 1 billion euros (before dividends, if any)

Pirelli Eco Technology

Pirelli Eco Technology aims to achieve a leadership position in the field of technology for control of diesel vehicle emissions with the use of particulate filters. This goal will be pursued in part thanks to synergies with Pirelli Tyre, in particular relating to use of its commercial network. The use of such filters is constantly increasing as international regulations become more and more stringent, and due to incentives for their use in some countries and the low cost of their application.
In particular, the company holds proprietary technology called Feelpure, which is a filter system based on silicon carbide, which can reduce particulate emissions of diesel engines by more than 95%.
The 'retrofit' technology used by Pirelli Eco Technology, destined for commercial vehicles and buses already in circulation:

allows for access to city center areas with limits on vehicles with high polluting levels, respecting the most recent European legislation;
is the only one to have obtained homologation in Italy;
is certified for access to limited traffic areas in Switzerland, Denmark, Sweden, Norway, the Netherlands, and the United Kingdom. In the first half of 2009 homologation is expected in key markets such as Germany and China.

In a market phase favorable to the widespread use of particulate filters, Pirelli Eco Technology intends to capitalize on the competitive advantage it enjoys, based on:

an increase in manufacturing capacity. The company is moving in this direction with the startup of the new totally automated factory in Romania (with annual manufacturing capacity of about 50,000 units) and the manufacturing facility in Arese (Italy, with capacity of around 30,000 units);
greater commercial presence in key markets, with a focus in 2009 on Italy and Germany that will extend in 2009-2011 to other parts of Europe and China and, later, to other parts of the world;
strengthening both in the retrofit segment and, in the medium term, in original equipment;
research and innovation, in part thanks to collaboration with international universities, as well as with Pirelli Labs, for development of new applications and continuous improvement of manufacturing processes. Today the new totally automated filter factory in Romania, developed as part of Pirelli's industrial aggregation there, is an example.

The goal is to become, within 3-5 years, leader in the 'retrofit' market in Europe.

Targets
2009:
Revenues: more than 100 million euros (approximately 60 million euros in 2008)
EBIT margin: more than 10%
2011:
Revenues: more than 200 million euros
EBIT margin: more than 20%

Pirelli RE

The objective of Pirelli RE is to increase efficiency of management of the assets in its portfolio, cut costs and adapt its internal organization to the changed scenario in the real estate market, accelerating the turnaround the company has already begun. Penalized by a phase in the market that renders the real value of its assets unexpressed, the company will go into the three-year period strengthened from an equity point of view thanks to the proposed capital increase.
Pirelli RE will continue restructuring and rationalization actions already begun, with the new organizational structure based on two territorial areas, Italy and Germany/Poland, less exposed than others to the volatility in the real estate market. The aim of the restructuring, whose benefits will be manifested already in 2009, is to rationalize intermediary organizational levels and reduce operating costs thanks to downsizing of personnel and a clear simplification of corporate structures.
The business units, organized by product specialization (Residential and Commercial), allow the company to combine local market knowledge and specialized product know-how. In Italy in particular it is foreseen that all real estate services and portfolio management will be concentrated in the Group's asset management company ("SGR"), which will become the main real estate asset manager in Italy, open to possible strategic partnerships.
Actions taken aim towards clearer highlighting of the high quality of the assets in the portfolio.
Sale of non-strategic assets such as the 'Non Performing Loans' (NPL) business will be part of the rationalization of the company's activities.
The new business model also aims at:

progressive reduction of debt;
reaching economic and financial equilibrium in real estate management through a better balance between recurring revenues and structural costs;
progressive reorientation from an approach characterized by rapid portfolio rotation to one more focused on quality and profitability;
selective management of real estate development projects, based on trends in demand.

The strategy for reaching these goals includes:

Actions on costs

rationalization of the number of employees in real estate, with the goal of reaching a headcount of about 800 people at the end of 2009, net of already expected outsourcing of activities;
reduction of the number of corporate vehicles and cutbacks in other fixed costs.

These actions will allow for savings of 50 million euros already in 2009.

Actions on revenues

Area: ITALY

Preside efficiently over all the phases in the value chain, responding to demand for services both in Residential and in Commercial (stores, offices, logistics).
Focus the business on the following activities:
sales of non-strategic real property and of the current Residential portfolio;
selective development of real estate initiatives in Residential, realizing products with distinctive characteristics such as eco-compatibility, at sustainable prices;
increase profitability in Commercial, bringing occupation rates of rental properties to above 95% in 2011, and improving profitability indicators on properties (such as the Yield/Cost ratio on investment and NOI (net operating income, the balance between gross income from properties and cost of managing the same properties);
partnerships in the public and private sectors for management of large real estate portfolios, as already experimented in Milan and Turin.

Area: GERMANY/POLAND
" Focus the business on the following activities:

in Residential: improvement of asset management, with the goal to increase profitability of assets, and administrative services for property in the portfolio (property management); concentration of Agency services on single unit sales;
in Commercial: improvement of asset management, with the goal to increase profitability of assets, and focus on reconversion of properties (development management); reallocation of part of the Karstadt (Arcandor Group) portfolio properties; further development of the shopping center management activity.

Financial structure

At the close of 2008, Pirelli RE had a negative net financial position of about 289 million euros, in line with previous year. The net financial position including debt owed to shareholders was, at the end of 2008, negative for approximately 862 million euros. This figure, thanks to the actions foreseen by the plan and in particular sales of assets and non-strategic activities - is expected to fall significantly during the three-year period to about 350 million euros at the end of 2009 and about 200 million euros at the end of 2011 (figures after proposed capital increase).

The company, whose debt owed to controlling shareholder Pirelli & C has been reduced to about 490 million euros from about 714 million euros as of 30 September 2008, can count on bank credit lines amounting to about 400 million euros.

The quota pertaining to Pirelli RE of total debt of real estate funds and vehicles it owns stakes in amounts to about 3 billion euros (3.6 billion euros including the 0.4 billion euros of shareholder financing relating to real estate activities and 0.2 billion euros of shareholder financing relating to NPL activities), divided between 2.6 billion euros in real estate and 0.4 billion euros in the NPL activities. That debt, which has an average residual life of approximately 3.6 years, is guaranteed by real property and by NPL credits behind the loans.
The net asset value (NAV) of real estate assets pertaining to Pirelli RE, following writedowns, amounts to approximately 800 million euros, the balance between the pro-quota market value of assets managed by Pirelli RE (approximately 3.8 billion euros) and the pro-quota debt owed by investment funds and vehicles to banks plus debt owed by Pirelli RE to Pirelli & C.
Refinancing needs of vehicles (average pro-quota share pertaining to Pirelli RE is 24%) amount to approximately 154 million euros for 2009 and approximately 176 million euros for 2010. Refinancing needs for 2011 amount to approximately 778 million euros, of which approximately 425 million euros related to Highstreet, the investment company which holds in its portfolio the buildings leased to Karstadt (Arcandor Group), the German department store chain, and which Pirelli RE owns 12% of, alongside shareholders like Deutsche Bank, Assicurazioni Generali and Goldman Sachs.

Targets
In 2009 the company aims for a turnaround, from a loss of 60 million euros in 2008 (EBIT including results from equity participations and before revaluations/writedowns and restructuring costs) to a profit of 20/30 million euros, thanks to actions on costs and on increasing the value of the asset management company ("SGR"). One billion euros in sales are foreseen this year, from which Pirelli RE will benefit pro-quota, and no acquisitions are foreseen.

As a trend, the goal for 2011 is one of stability of assets managed compared with 2008, in part thanks to management of new third party portfolios, and EBIT close to 100 million euros (including results from equity participations and before revaluations/writedowns and restructuring costs).

Proposed capital increase
Within the context of the three-year plan, the Board of Directors of Pirelli RE reviewed a transaction aimed at strengthening the equity structure and sustaining the new business model, approving a proposal for a capital increase, with shareholders' pre-emption right, up to a maximum amount of 400 million euros.
In terms of the conditions for the capital increase, it is foreseen that the shareholders give a mandate to the Board to set, among other things, the issue price, taking as a point of reference the theoretical ex-rights price ("TERP") of Pirelli RE ordinary shares and applying a discount in line with the conditions, and best practices, applied on the market in similar transactions.
The capital increase transaction has received the full support of controlling shareholder Pirelli & C., which has committed itself to underwrite the quota pertaining to it and has declared its willingness to underwrite any shares which, at the end of the offer procedure, are not underwritten. Pirelli & C. will fulfill its commitment by converting part of its financial credit vis a vis Pirelli RE into equity.
The documentation legally required to formulate the capital increase proposal to the extraordinary shareholders' meeting will be examined by the Board of Directors' meeting of Pirelli RE scheduled for 5 March. The Board meeting will also call the extraordinary shareholders' meeting which, presumably, will be scheduled to coincide with the ordinary shareholders' meeting called to approve the financial statements for the year that closed on 31 December 2008.
It is foreseeable that the transaction may be completed in the first half of the current year, assuming approval by the extraordinary shareholders' meeting and necessary authorizations from competent authorities.

Pirelli Ambiente

Pirelli Ambiente is the company in the Pirelli Group specialized in technologies for sustainable development, renewable energy sources including photovoltaic, and environmental site remediation.
In the three-year period, the Group foresees a redefinition of the assets in the company's portfolio, with a strong imprint in the direction of photovoltaic energy in a scenario that offers excellent opportunities for development. In this area the company operates with Solar Utility, the 50/50 joint venture with Global Cleantech Capital.

The strategy outlined for reaching objectives includes:

Technological leverage: thanks to collaboration with Pirelli Labs, Pirelli Ambiente has developed a solar tracker with low visual impact, high wind resistance and reduced installation and maintenance costs. The company has also recently realized a photovoltaic concentrator, a highly innovative solar panel with reduced costs thanks to reduced use of silicon, greater efficiency per solar cell, and lower cost manufacturing processes;
Increase in energy generation capacity, to reach up to about 50 MegaWatts at the end of 2010, in particular thanks to 10 systems now awaiting authorization, whose construction will begin in the second quarter of 2009.

Pirelli Broadband Solutions

Pirelli Broadband Solutions is the company in the Pirelli Group which operates in broadband access solutions, offering a range of products for domestic and small business solutions, with access gateways, IPTV set-top boxes, remote management systems and fixed-mobile convergence solutions for the digital home. The company addresses a market whose potential value is estimated at 2.5 billion euros today, and is growing rapidly thanks to development of the 'quadruple play', to incentives for new generation network construction, and to progressive diffusion of IPTV.

In the three-year period the company plans:

constant focus on technological innovation;
completion and broadening of the product portfolio, with consequent diversification and growth of the customer base;
strengthening of its commercial presence internationally, with particular attention to Latin America, Asia Pacific, and North Africa;
possible strategic partnerships to sustain further development. Targets

2009 :
Revenues: 130 to 140 million euros
EBIT margin: 3 to 3.5%
Net financial position: stable (negative for approximately 15 million euros in 2008)

2011 :
Revenues: 140 to 150 million euros
EBIT margin: 4 to 4.5%
Net financial position: stable

The manager mandated to draft corporate accounting documents of Pirelli & C. SpA, Claudio De Conto, and the manager mandated to draft corporate accounting documents of Pirelli RE, Gerardo Benuzzi, declare - as per art. 154-bis, comma 2 of the Testo Unico della Finanza - that the accounting information contained in this press release corresponds to the documented results, books and accounting registers of the above mentioned companies.

Pirelli Group 2009-2011 Industrial Plan (PDF Version, 251KB)

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